Commodities are an incredibly strong investment choice. A great way to build a diverse portfolio, they lack the volatility of stocks while providing great room for financial growth.
But investing in commodities without knowing what you’re doing is a bad idea.
If you want to make this investment, you’ll need to develop an intelligent strategy. Here are some commodity tips to help you make that move.
Commodities Explained
Before you read any other commodity tips, you need to understand the concept. Commodities are structured trades around the delivery, sale, import, and export of a particular good. Popular commodities include oil, gold, and soybeans.
The most popular strategy for investing in commodities is signing a futures contract. These ensure that you will own the commodity for a set amount of time before selling it on a certain date at a specific price.
Here are a few tips for making the most out of your commodity trades in 2017.
Why ETFs Are A Good Choice
If you’re looking for an effective way to invest in commodities, one of the best ways to do it is through ETFs. ETFs, or Exchange-traded funds, can either monitor a commodity or a specific market index.
ETFs can be a great way for beginners to invest in commodities. They are easy to manage and involve a lot less red tape than a futures index. While investing in ETFs is not the only way to make a profit off of a commodity investment, it is the best way to get acquainted.
How To Use a Short Position
Many have a strong preference for the simple game of going long on their commodities. But this can be a mistake. There’s a lot of money to be made off of the short sell, and it also isn’t particularly difficult.
If you detect a market depreciation, you should sell shares in a commodity. Let the commodity depreciate in value: when you feel it has bottomed out and will experience a resurgence in value, you should buy shares.
This will allow you to minimize the cost of purchasing valuable commodities while profiting off of purchases of a commodity at a low value. Every trader should stop worrying and love the short.
Read The News (Financial and Otherwise)
Commodities are very complex. But in a way, they can also be relatively simple to understand. As a matter of fact, indexes for every commodity from corn to currency will appear in the newspaper. And not just in the business section.
Staying on top of everything from policy to boardroom rumors can help you make the right decision. So devote at least an hour to the news each day.
Be An Oil Skeptic
Oil is one of the most popular commodities. And while it can perform well or poorly in various technical analyses, an essential part of risk mitigation involves taking a look at the international political environment.
Whether it’s through long-term transformations in the energy market or instability in OPEC nations, the future for oil is questionable. In the name of risk mitigation, we would advise approaching oil with caution.
Beyond Commodity Tips: Work With The Best
Tips can take you far. But you can go even further by working with seasoned financial professionals.
Work with the experts in various areas of trading. One of these areas is commodities trading. But whether you’re looking to succeed at the trading of commodity ETFs or to continue boosting an already thriving portfolio, always look for the best people to work with.
